BILL NUMBER: SB 997	CHAPTERED  09/27/99

	CHAPTER   522
	FILED WITH SECRETARY OF STATE   SEPTEMBER 27, 1999
	APPROVED BY GOVERNOR   SEPTEMBER 27, 1999
	PASSED THE SENATE   AUGUST 31, 1999
	PASSED THE ASSEMBLY   AUGUST 26, 1999
	AMENDED IN ASSEMBLY   AUGUST 16, 1999
	AMENDED IN SENATE   MAY 17, 1999
	AMENDED IN SENATE   APRIL 5, 1999

INTRODUCED BY   Senator Brulte

                        FEBRUARY 26, 1999

   An act to amend Sections 16731, 16733, 16754.3, and 16781 of the
Government Code, relating to state bonds.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 997, Brulte.  State general obligation bonds.
   (1) Under the State General Obligation Bond Law, the finance
committee for a bond issuance is required to adopt a resolution that
includes, among other things, the rate of interest that the bonds to
be issued shall bear.
   This bill would authorize the finance committee to specify that
the bonds may pay a variable interest rate, as prescribed in the
resolution, as long as no more than 20% of the aggregate principal
amount of all outstanding bonds bear a variable interest rate.  The
bill would make other conforming changes to provisions that relate to
general obligation bonds.
   (2) Under the State General Obligation Bond Law, all of the
provisions of that law, with specified exceptions, are applicable to
the issuance of refunding bonds.  Existing law provides that state
general obligation bonds are to be sold by the Treasurer either by
sealed bids to the bidder whose bid will result in the lowest
interest costs or by negotiated sale upon the Treasurer making
certain findings.
   This bill would authorize the sale of refunding bonds by
negotiated sale if the Treasurer determines that it is in the best
interest of the state to do so.
   (3) This bill would incorporate additional changes in Section
16754.3 of the Government Code proposed by AB 1506, to be operative
only if AB 1506 and this bill are both chaptered and become effective
January 1, 2000, and this bill is chaptered last.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:


  SECTION 1.  Section 16731 of the Government Code is amended to
read:
   16731.  Whenever the committee determines that the sale of all or
any part of the bonds authorized to be issued is necessary or
desirable, it shall adopt a resolution to that effect.  The
resolution shall specify the following as to the bonds then to be
sold:
   (a) The aggregate number, aggregate par value, denominations, and
the date of the bonds to be then sold.  The denominations shall be in
the sum of one thousand dollars ($1,000) or multiples of that sum.
The date appearing on the bonds shall be deemed to be the date of
issuance for all purposes of this chapter, irrespective of the actual
date of delivery of the bonds and the payment of the purchase price
of the bonds.
   (b) The dates of maturity and the amount of the bonds maturing at
each date of maturity, which amounts need not be equal, but which
dates shall be at annual or semiannual intervals.  The first dates of
maturity shall be not more than five years, and the last dates of
maturity shall be not more than 45 years, after the date of the
bonds.
   (c) Whether or not the bonds are to be subject to redemption at
the option of the board prior to maturity, and, if so, the provisions
for the redemption, the manner of the call thereof, and the price or
prices at which the bonds shall be subject to redemption.
   (d) The annual rate, or rates, of interest that the bonds to be
issued shall bear, which may be in multiples of one-eighth or
one-twentieth of 1 percent, payable semiannually, but not in excess
of 11 percent.  The rate or rates may be determined at the time of
the sale of the bonds.  Alternatively, the resolution may specify
that the bonds may pay a variable interest rate, as prescribed in the
resolution.  However, at the time and as the result of the issuance
of any bonds bearing a variable interest rate, the aggregate
principal amount of all state general obligation bonds bearing
variable interest rates may not exceed 20 percent of the aggregate
principal amount of all state general obligation bonds then
outstanding.  For purposes of this calculation, variable rate bonds
shall not include bonds issued pursuant to Section 16731.6 or bonds
that have an effective fixed interest rate through a hedging
contract.
   (e) The interest payment dates.
   (f) The technical form and language of the bonds.
   (g) Whether or not the right is reserved to make delivery in the
form of temporary or interim bonds, certificates, or receipts,
exchangeable for definitive bonds when executed and available for
delivery.  If the right is reserved, the denominations and form of
the temporary securities shall be stated.
   (h) Whether the bonds are to be issued in coupon form or in fully
registered form, or both, and whether or not any coupon bonds are to
be subject to registration.  If coupon bonds are to be subject to
registration, the resolution shall state whether the registration is
to be as to principal only, as to both principal and interest, or in
either of the forms at the option of the holder, and the form and all
of the terms and conditions of the registration.  If the
registration is provided for, coupon bonds may be interchanged for
registered bonds and registered bonds for coupon bonds, and all of
the provisions of this chapter with reference to the payment of bonds
and interest coupons shall be subject to the terms and conditions of
the registration with respect to the payment of registered bonds and
the interest on registered bonds.
   (i) All other terms and conditions of the bonds and of the
execution, issuance, and sale of the bonds, which shall be consistent
with all of this chapter.
  SEC. 2.  Section 16733 of the Government Code is amended to read:
   16733.  The rate of interest to be borne by the bonds need not be
uniform for all bonds of the same issue, and shall be the rate or
rates specified in the bid accepted by the Treasurer, unless a
variable interest rate is prescribed for the bonds in the resolution
pursuant to subdivision (d) of Section 16731.  The first interest
payment date may be any date within one year after the date of the
bonds.
  SEC. 3.  Section 16754.3 of the Government Code is amended to read:

   16754.3.  (a) The bonds specified in the resolution shall be sold
by the Treasurer, at the time fixed by the Treasurer, and upon the
notice that the Treasurer may deem advisable, or at the time to which
the sale shall have been so continued, either at public sale, upon
sealed bids, to the bidder whose bid will result in the lowest
interest cost on account of those bonds or by negotiated sale if the
Treasurer determines it will result in a lower interest cost.  With
respect to bonds sold by the Treasurer by negotiated sales, the
Treasurer shall make a finding on the public record as to why a
public sale was not used.  The Treasurer may sell the bonds at a
price below the par value thereof, but the discount on bonds so sold
shall not exceed 3 percent of the par value.  The interest, if any,
accrued to the date of delivery of, and payment for, the bonds shall
be added to the sale price of the bonds in any case.
   (b) The method of determining the lowest interest cost bid shall
be prescribed in the bond resolution and shall be limited to either
the net interest cost method or the true interest cost method.  The
net interest cost of each bid shall be determined by ascertaining the
total amount of interest which the state would be required to pay
under that bid, from the date of the bonds to the respective maturity
dates of the bonds then offered for sale, at the interest rate or
rates specified in the bid, less the total amount of the premium, if
any (or plus the total amount of the discount, if any), offered by
the bid.  The bid under which the amount so ascertained is the least
shall be deemed to be the bid resulting in the lowest net interest
cost.  Under the true interest cost method, the bonds shall be
awarded to the bidder submitting the lowest interest rate bid
determined by the nominal interest rate that, when compounded
semiannually and used to discount the debt service payments on the
bonds to the date of the bonds, results in an amount equal to the
price bid for the bonds, excluding interest accrued to the date of
delivery.  Under either method the sale shall be for cash, payable
upon the delivery of the bonds in definitive form, or if the right to
deliver temporary securities has been reserved, then upon the
delivery of the temporary securities.
   (c) If the resolution prescribes that the bonds may pay a variable
interest rate, as specified in subdivision (d) of Section 16731, the
Treasurer may sell the bonds either at public sale, upon sealed
bids, or by negotiated sales, as prescribed in subdivision (a).
   (d) This section shall apply to any bonds authorized at any
statewide election held at any time after the effective date of this
section.  Section 16754 shall apply only to bonds authorized at
elections held before the effective date of this section.
  SEC. 3.5.  Section 16754.3 of the Government Code is amended to
read:
   16754.3.  (a) The bonds specified in the resolution shall be sold
by the Treasurer, at the time fixed by the Treasurer, and upon the
notice that the Treasurer may deem advisable, or at the time to which
the sale shall have been so continued, either at public sale to the
bidder whose bid will result in the lowest interest cost on account
of those bonds or by negotiated sale if the Treasurer determines it
will result in a lower interest cost.  With respect to bonds sold by
the Treasurer by negotiated sales, the Treasurer shall make a finding
on the public record as to why a public sale was not used.  The
Treasurer may sell the bonds at a price below the par value thereof,
but the discount on bonds so sold shall not exceed 3 percent of the
par value.  The interest, if any, accrued to the date of delivery of,
and payment for, the bonds shall be added to the sale price of the
bonds in any case.
   (b) The method of determining the lowest interest cost bid shall
be prescribed in the bond resolution and shall be limited to either
the net interest cost method or the true interest cost method.  The
net interest cost of each bid shall be determined by ascertaining the
total amount of interest that the state would be required to pay
under that bid, from the date of the bonds to the respective maturity
dates of the bonds then offered for sale, at the interest rate or
rates specified in the bid, less the total amount of the premium, if
any , or plus the total amount of the discount, if any, offered by
the bid.  The bid under which the amount so ascertained is the least
shall be deemed to be the bid resulting in the lowest net interest
cost.  Under the true interest cost method, the bonds shall be
awarded to the bidder submitting the lowest interest rate bid
determined by the nominal interest rate that, when compounded
semiannually and used to discount the debt service payments on the
bonds to the date of the bonds, results in an amount equal to the
price bid for the bonds, excluding interest accrued to the date of
delivery.  Under either method the sale shall be for cash, payable
upon the delivery of the bonds in definitive form, or if the right to
deliver temporary securities has been reserved, then upon the
delivery of the temporary securities.
   (c) If the resolution prescribes that the bonds may pay a variable
interest rate, as specified in subdivision (d) of Section 16731, the
Treasurer may sell the bonds either at public sale or by negotiated
sales, as prescribed in subdivision (a).
   (d) This section shall apply to any bonds authorized at any
statewide election held at any time after the effective date of this
section.  Section 16754 shall apply only to bonds authorized at
elections held before the effective date of this section.
  SEC. 4.  Section 16781 of the Government Code is amended to read:
   16781.  (a) Except as otherwise provided in this article or in
subdivision (b), all of the provisions of this chapter are applicable
to the issuance and sale of refunding bonds.
   (b) (1) Sections 16730 and 16757 are not applicable to the
issuance and sale of refunding bonds.
   (2) Notwithstanding Section 16754.3, refunding bonds may be sold
by negotiated sale if the Treasurer determines that it is in the best
interest of the state to do so.
  SEC. 5.  Section 3.5 of this bill incorporates amendments to
Section 16754.3 of the Government Code proposed by both this bill and
AB 1506.  It shall only become operative if (1) both bills are
enacted and become effective on or before January 1, 2000, (2) each
bill amends Section 16754.3 of the Government Code, and (3) this bill
is enacted after AB 1506, in which case Section 3 of this bill shall
not become operative.
